jakiro
Author: Divine Grace
Bitcoin fell below the US$90,000 mark, while gold sat firmly above US$4,000. This battle between digital assets and traditional precious metals is evolving into a bloody capital battle.
“I have always thought that gold would burst the Bitcoin bubble, and now it seems that it may be silver.” Peter Schiff, a well-known economist, expressed this shocking view on social media.Not long ago, he spoke out again, pointing out that Bitcoin has fallen by about 40% in gold terms, and claimed thatBitcoin’s “Digital Gold” Narrative Is Completely Broken.
Market status, the life and death battle between Bitcoin and silver
There has been a rare divergence in financial markets recently.Silver surged above $45, hitting its highest level since 2011, while Bitcoin fell from August’s all-time highs and fell below key support at $90,000.
This divergence between traditional precious metals and cryptocurrencies has aroused widespread concern in the market.Ethereum was not immune, falling more than 20% from its August high.Officially entering a technical bear market.
The drop triggered massive liquidations, with more than $1 billion in contract positions liquidated on major global exchanges in just one hour.Peter Schiff was quick to seize on this market change, highlighting Bitcoin’s worse performance relative to gold.
He noted that Bitcoin, priced in gold, has fallen 20% from its August high, meaningBitcoin has officially entered a bear market relative to gold.”Bitcoin has not lived up to expectations,” Schiff said. “Because Bitcoin is promoted as digital gold, a 20% decline relative to gold is more significant than a decline relative to the U.S. dollar.”
Digital gold narrative, truth or bubble?
Schiff, chief global strategist at Euro Pacific Capital, has been a staunch supporter of gold and a sharp critic of Bitcoin.He believes that gold has thousands of years of stability and intrinsic value based on its physical properties and limited supply, while Bitcoin is a speculative bubble that relies on belief and hype.
Schiff pointed out,The total market value of gold is as high as $17.2 trillion, the market value growth in 2024 alone will reach US$5.7 trillion, while the total market value of Bitcoin is only US$1.1 trillion.He emphasized: “Gold’s market value growth in 2024 is already equal to the total market value of Bitcoin.five times, this data challenges the narrative of Bitcoin as ‘digital gold’.
This view is supported by some data.The spot price of gold has recently approached a historical high of $3,800, with an increase of 42% this year, while Bitcoin has performed relatively weakly during the same period.This comparison reinforces Schiff’s belief that traditional precious metals are superior to cryptocurrencies as a store of value.
Analysts at blockchain analytics firm CryptoQuant said that worryingly, the recent sell-off by “whales” has coincided with worsening market sentiment and slowing buying, which could put further pressure on Bitcoin prices.
Digital currency treasury company, business model faces survival test
The so-called “digital currency treasury company” refers to a listed company that invests a large amount of company funds in cryptocurrency as a reserve asset.MicroStrategy is the pioneer of this model, currently holds nearly 640,000 Bitcoins, with a total purchase cost of US$47.33 billion.
At the heart of this business model is this: Companies raise money by issuing stocks or bonds and then buy large amounts of cryptocurrencies in the hope that the appreciation of the cryptocurrencies will bring returns that far exceed those of traditional businesses.In the bull market, this strategy has indeed produced amazing returns, and MicroStrategy’s stock price has soared due to the rise of Bitcoin.
This model carries fatal risks.Today, MSTR’s stock price has fallen below the $300 mark for the first time since April this year, wiping out almost all of its gains over the past year.Analyst Peter DiCarlo pointed out that MSTR’s stock price has shown signs of “breaking out” and if it cannot hold the current support level, it may fall further to the $240 level.
Even more worrying is MicroStrategy’s financing strategy.The company has funded part of its recent Bitcoin purchases by selling its own stock, which is extremely dangerous during a downward cycle in asset prices.Selling equity to add to a position in a highly volatile crypto asset amounts to amplifying risk in a falling market.
Giant whales sell off, market liquidity is under pressure
Bitcoin fell below the key $90,000 mark last week, and recent selling by “whales” (investors who hold large amounts of the cryptocurrency) and other long-term holders has been a significant driver of the recent weakness in the price.
Most blockchain analysis companies define “whales” as individuals or institutions holding 1,000 or more Bitcoins.Although most whales are unknown, blockchain data can still provide clues to their activities by tracking their cryptocurrency wallets.
Data shows that some “giant whales” have recently accelerated the pace of Bitcoin selling.Martin Leinweber, head of digital asset research and strategy at MarketVector Indexes, said such sell-offs may reflect “planned asset allocation.”“Some Bitcoin investors bought when the price was in the single digits and waited so long.Now there is finally enough liquidity to sell without completely disrupting the market,” he told MarketWatch.
Fund flows to investment products could reflect weak demand – as of recently,Bitcoin exchange-traded funds (ETFs) see fifth consecutive week of outflows, the longest continuous outflow period since the week ending March 14.
05 Retail investors, where is the current market headed?
Faced with market volatility, retail investors are in a particularly difficult position.Data shows that the departure of retail investors from the A-share market has shown a certain trend.Although from the perspective of market development, retail investors leaving the market should be a positive signal, they cannot be “forced” to leave because of sadness and disappointment.
In the cryptocurrency market, a similar situation is playing out.Schiff warns that Bitcoin is shifting assets away from long-term holders and into the hands of “weaker investors”, will lead to more serious retracement in the future.
Bitcoin “is finally having its IPO moment,” he said, adding that the market now has enough liquidity for long-term holders to cash out.“Having so much Bitcoin move from strong hands to weak hands not only increases the number of shares outstanding, but also means that future sell-offs will be even greater,” Schiff added.
Vineet Budki, CEO of venture capital firm Sigma Capital, also pointed out that retail investors are likely to sell Bitcoin at the first sign of trouble, adding that a lack of confidence among retail investors will lead to a 70% price drop in the next bear market.
But some analysts hold a different view.Bitfinex analysts said,Bitcoin fundamentals remain strongAnd is attractive to institutional investors, who will continue to adopt Bitcoin and drive demand.
Data shows that more than 100 companies that have followed MicroStrategy are now facing severe tests. The market value of many companies has been lower than the value of their cryptocurrency holdings, and they have fallen into the dilemma of “trading at a discount.”And Michael Saylor’s Strategy’s mNAV, a key valuation metric used to compare a company’s market capitalization to the value of its Bitcoin holdings, has plummeted from over 2.5 to just 1.2.
The ultimate winner of this battle has yet to be determined, but one thing is clear: the market is revisiting the “digital gold” narrative.For Bitcoin to truly prove itself, it needs to demonstrate its resilience in headwinds, not just gains in tailwinds.
